Correlation Between Oracle and Nationwide Small

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Can any of the company-specific risk be diversified away by investing in both Oracle and Nationwide Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Oracle and Nationwide Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oracle and Nationwide Small Cap, you can compare the effects of market volatilities on Oracle and Nationwide Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Oracle with a short position of Nationwide Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and Nationwide Small.

Diversification Opportunities for Oracle and Nationwide Small

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Oracle and Nationwide is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap and Oracle is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Oracle are associated (or correlated) with Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Oracle i.e., Oracle and Nationwide Small go up and down completely randomly.

Pair Corralation between Oracle and Nationwide Small

Given the investment horizon of 90 days Oracle is expected to generate 1.38 times more return on investment than Nationwide Small. However, Oracle is 1.38 times more volatile than Nationwide Small Cap. It trades about 0.19 of its potential returns per unit of risk. Nationwide Small Cap is currently generating about 0.18 per unit of risk. If you would invest  15,554  in Oracle on September 10, 2024 and sell it today you would earn a total of  3,491  from holding Oracle or generate 22.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.46%
ValuesDaily Returns

Oracle  vs.  Nationwide Small Cap

 Performance 
       Timeline  
Oracle 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.
Nationwide Small Cap 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nationwide Small showed solid returns over the last few months and may actually be approaching a breakup point.

Oracle and Nationwide Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oracle and Nationwide Small

The main advantage of trading using opposite Oracle and Nationwide Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, Nationwide Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nationwide Small will offset losses from the drop in Nationwide Small's long position.
The idea behind Oracle and Nationwide Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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